Global Leader Organization Strategy Consulting
Perspectives
Culture: The secrets to success
Our look at how The Coca-Cola Company, Johnson & Johnson and other World’s Most Admired Companies are using culture to drive value amid economic uncertainty.
The problem: A confluence of factors, among them changing market conditions, a labor shortage, and remote and hybrid work, are creating fears among leaders that they are losing their corporate cultures.
Why it matters: Two-thirds of the World’s Most Admired Company (WMAC) executives say culture is responsible for upwards of 30% of a company’s market value.
The solution: Provide clarity on cultural objectives, get leadership buy-in, measure and assess performance, and promote and develop the right talent.
For almost as long as its been in existence, The Coca-Cola Company’s mission has been to “refresh the world”—and it meant that quite literally. But in 2019, as the company’s leaders began noticing that the needs and expectations of its customers, employees, and investors were shifting, its purpose took on new meaning. If Coca-Cola wanted to refresh the modern world, it needed to expand the definition to include mind, body, and spirit of the people, communities, and stakeholders it serves.
“It was very serendipitous that we launched our new purpose just before the pandemic,” says Lisa Chang, Senior Vice President and Global Chief People Officer at The Coca-Cola Company. “It really became the backbone of how we led through the crisis.” Moreover, many of the cultural touchstones underlying Coke’s purpose—collaboration, customer focus, agility—are also responsible for its success amid the shift to remote and hybrid work.
A confluence of factors, among them changing market conditions, a labor shortage, and remote and hybrid work, are creating fears among leaders that they are losing their corporate cultures. Numerous studies show rebuilding or restoring culture among the top reasons cited by leaders for wanting workers back in the office, for instance. But companies like Coca-Cola and Johnson & Johnson have not only been able to maintain, but also strengthen their cultures amid the current turmoil. Indeed, these companies, like other WMACs, are able to thrive in the new business landscape precisely because of their respective cultures. At Johnson & Johnson, for instance, values like people first focus, accountability, inclusivity and innovation are embedded in its Credo, an 80-year-old document that Executive Vice President and Chief Human Resources Officer Peter Fasolo says is as relevant today as when it was written. “Companies with strong cultural characteristics find that those capabilities instinctually kick into gear when needed most,” says Fasolo.
Every year, Korn Ferry and Fortune magazine survey thousands of executives and analysts across industries worldwide to rank the World’s Most Admired Companies. The rankings look at attributes such as quality of management, ability to attract and retain talent, and innovation, among others. As part of that survey, Korn Ferry also conducts research on an isolated aspect of the companies, and this year’s topic was culture. “Culture is the most underrated determinant for long-term success,” says Laura Manson-Smith, global leader of organizational strategy consulting at Korn Ferry.
That’s not just her opinion—it’s what executives and analysts cited in the survey as well. Two-thirds of WMAC executives say culture accounts for as much as 30% of a company’s market value; one-third say it contributes 50% or more. With so much value and growth potential at stake, Manson-Smith says leaders are feeling pressure to be more intentional about culture. For some, however, it might be too late. “Too many companies have culture by default and not enough have culture by design,” she says.
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Amid the shift to remote work and against the backdrop of the purpose movement, more and more leaders are realizing that the wrong culture is as much a liability as the right culture is an asset. Nearly half of the WMAC executives surveyed say the pandemic and remote work increased the importance of culture to future success, for instance.
In fact, one trait shared by the WMACs is that while culture sets the boundaries for behaviors that are and are not acceptable, what’s prioritized within those boundaries can be adjusted to meet changing business realities. That’s evident in how the cultural priorities of the WMACs have evolved to reflect not only the continued uncertainty in the economic environment, but also the heightened expectations of employees, customers, investors, and other stakeholders. According to Korn Ferry research, WMAC executives rank learning as the biggest cultural priority for the future where previously it ranked fifth. “Creating the conditions for learning is an area of focus for many WMACs right now,” says Sarah Jensen Clayton, Global Head of Culture, Change & Communications at Korn Ferry.
Other cultural muscles WMACs are looking to strengthen include collaboration, long-term thinking, accountability, innovation, and agility. The emphasis on these traits, says Clayton, show how smart companies understand that developing the right mindsets among talent is just as important as having the right skills to succeed in a distributed, hybrid, digital-first, post-pandemic world of work.
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There are two moments of truth when companies can demonstrate their commitment to culture, says Johnson & Johnson’s Fasolo: when you pay someone and when you promote them. Decisions made on raises, bonuses, promotions and other kinds of rewards that are consistent with desired behaviors can strengthen culture, says Fasolo. “But if there is an incongruency between words and rewards, you can set your culture back or neutralize it,” he says. Put another way, if collaboration or agility are cultural priorities but you aren’t incentivizing and rewarding talent for developing and exhibiting those traits it could lead to big problems, such as disengagement, demotivation, or even retention issues.
To be sure, one practice common to all WMACs is that they measure and assess both leadership and talent on progress made against cultural objectives just as they would on performance. At Johnson & Johnson, for instance, leaders and managers are measured on how well they are living the company’s Credo. Progress is reviewed on a regular basis with senior management, the Executive Committee and the Board of Directors to ensure accountability to its cultural principles, and for those that fall short, action sessions are set up based on the specific feedback received.
The emphasis on management and leadership stems from the fact that employees will mirror behaviors exhibited at the top of the house. Indeed, 84% of WMAC executives surveyed cite leader role modeling as the most important influence on culture. “You want to ensure your role models are visible and that their voices are carried throughout the organization,” says Fasolo.
In addition to an actual scorecard, Coca-Cola’s Chang says the leadership team likes to use a metaphorical point system to illustrate to talent the importance of culture to performance. In the analogy, one point is awarded for every behavior exhibited that is consistent with the company’s culture and values, however, for every culturally inconsistent behavior 10 points is deducted. “The point is to show that what you do that’s inconsistent costs a lot more,” she says.
For more information, contact Laura Manson-Smith at laura.manson-smith@kornferry.com, Sarah Jensen Clayton at sarah.jensenclayton@kornferry.com, Mark Richardson at mark.richardson@kornferry.com, or Mark Royal at mark.royal@kornferry.com.
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